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Fontaine Bros., Inc. v. Acadia Insurance Co.

United States District Court, D. Massachusetts

August 29, 2019

FONTAINE BROS., INC., Plaintiff,
v.
ACADIA INSURANCE COMPANY and UNION INSURANCE COMPANY, Defendants.

          MEMORANDUM & ORDER REGARDING PLAINTIFF'S AND DEFENDANTS' CROSS MOTIONS FOR SUMMARY JUDGMENT (DKT. NOS. 22 & 25)

          KATHERINE A. ROBERTSON, United States Magistrate Judge.

         I. Introduction

         In 2009, the City of Worcester (“the City”) contracted with Fontaine Brothers, Inc. (“Plaintiff”) for the installation of a new ice refrigeration system at the City's indoor ice rink at the DCU Center. On April 29, 2015, after the condensers in two chiller units eroded and stopped operating, the City filed suit against Plaintiff, seeking to recover for the costs of leasing temporary chillers and installing new ones. This action by Plaintiff against Acadia Insurance Company and Union Insurance Company (“Defendants”) seeks to resolve whether an insurance policy issued to Plaintiff by Defendants obligated them to defend and indemnify Plaintiff against liabilities incurred in the lawsuit brought by the City. Defendants removed the case to this court on the basis of diversity, see 28 U.S.C. § 1332(a) and 1441(a), and the parties consented to this court's jurisdiction (Dkt. No. 11). See 28 U.S.C. § 636(c); Fed.R.Civ.P. 73. The court heard argument from the parties on April 1, 2019 and took the motions under advisement (Dkt. No. 34). For the reasons set forth below, the court denies Plaintiff's motion and allows Defendants' motion.

         II. Applicable Legal Standards

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In considering a motion for summary judgment, the court must “consider[] the record and all reasonable inferences therefrom in the light most favorable to the non-moving part[y]. Where, as here, a district court rules simultaneously on cross-motions for summary judgment, it must view each motion, separately, through this prism.” Estate of Hevia v. Portrio Corp., 602 F.3d 34, 40 (1st Cir. 2010). Interpretation and application of the relevant provisions of an insurance policy are questions of law often suitable for resolution on summary judgment. See Zurich Am. Ins. Co. v. Elec. Maine, LLC, 927 F.3d 33, 35 (1st Cir. 2019); see also Utica Mut. Ins. Co. v. Herbert H. Landy Ins. Agency, Inc., 820 F.3d 36, 41 (1st Cir. 2016) (“‘Where [as here] facts are not in dispute, the interpretation and application of the [insurance] policy language is a question of law.'” (quoting Massamont Ins. Agency, Inc. v. Utica Mut. Ins. Co., 489 F.3d 71, 72 (1st Cir. 2007) (alterations in original))); Nascimento v. Preferred Mut. Ins. Co., 513 F.3d 273, 276 (1st Cir. 2008) (“Under Massachusetts law, the interpretation of an insurance policy and the application of policy language to known facts pose questions of law for the court to decide.”).

         The parties agree that Massachusetts law governs this dispute.[1] Under Massachusetts law, the insured bears the initial burden of establishing that the case involves a generally covered risk under the policy. See Sterngold Dental, LLC v. HDI Global Ins. Co., 929 F.3d 1, 6 (1st Cir. 2019); Stor/Gard, Inc. v. Strathmore Ins. Co., 717 F.3d 242, 247 (1st Cir. 2013); Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399, 404 (1st Cir. 2009) (citing Highlands Ins. Co. v. Aerovox Inc., 676 N.E.2d 801, 804 (Mass. 1997)). If the insured makes this showing, “it falls to the insurer ‘to prove the applicability of one or more separate and distinct exclusionary provisions.'” Essex Ins. Co., 562 F.3d at 404 (quoting B & T Masonry Const. Corp. v. Pub. Serv. Mut. Ins. Co., 382 F.3d 36, 39 (1st Cir. 2004) (citing Highlands Ins. Co., 676 N.E.2d at 804)). “Where there is doubt over the meaning of a term, it is ‘appropriate to consider what an objectively reasonable insured, reading the relevant policy language, would expect to be covered.'” U.S. Liability Ins. Co. v. Benchmark Const. Servs., Inc., 797 F.3d 116, 120 (1st Cir. 2015) (quoting Trs. of Tufts Univ. v. Commercial Union Ins. Co., 616 N.E.2d 68, 72 (Mass. 1993)).

         “‘It is settled that an insurer's duty to defend is independent from, and broader than, its duty to indemnify.'” Metro. Prop. & Cas. Ins. Co. v. Morrison, 951 N.E.2d 662, 667 (Mass. 2011) (quoting A.W. Chesterton Co. v. Mass. Insurers Insolvency Fund, 838 N.E.2d 1237, 1256 (Mass. 2005)).

[T]he Massachusetts Supreme Judicial Court has stated that “[a]n insurer has a duty to defend an insured when the allegations in a complaint are reasonably susceptible of an interpretation that states or roughly sketches a claim covered by the policy terms.... In order for the duty of defense to arise, the underlying complaint need only show, through general allegations, a possibility that the liability claim falls within the insurance coverage. There is no requirement that the facts alleged in the complaint specifically and unequivocally make out a claim within the coverage. However, when the allegations in the underlying complaint lie expressly outside the policy coverage and its purpose, the insurer is relieved of the duty to investigate or defend the claimant. The nature of the claim and not the ultimate judgment against the insured triggers the duty to defend even though the plaintiff may not succeed and the claim may, in fact, be weak or frivolous... .”

Utica Mut. Ins. Co., 820 F.3d at 41 (quoting Morrison, 951 N.E.2d at 667) (citations and internal formatting omitted in original).

         III. Background[2]

         A. Worcester's Lawsuit

         On April 29, 2015, the City of Worcester (“the City”) brought suit against Plaintiff, among others, [3] alleging breach of contract (Count One) and negligence (Count Two) stemming from the breakdown and failure of critical components of two ice rink refrigeration units that Plaintiff had been contracted to install (Dkt. No. 27-1 at 1). Six years earlier, in May 2009, the City entered into a multi-million-dollar contract with Plaintiff “to install a brand-new ice refrigeration system, to include, among other equipment and infrastructure, two reciprocating glycol brine chiller packages” at an indoor ice rink known as the DCU Center (Dkt. No. 32 at 1, 3, ¶¶ 2, 6; Dkt. No. 1 at 1, ¶ 6). Plaintiff (or its subcontractors) installed two refrigeration units, and by October 2009, they were operational (Dkt. No. 27-1 at 2, ¶ 14). The City's lawsuit alleged that within four years of the installation, the condensers within the refrigeration units failed because (1) Plaintiff installed condensers with carbon steel tubes instead of contractually-required stainless steel tubes and (2) Plaintiff and its subcontractors did not adequately maintain the condensers, also in breach of the contract (Dkt. No. 27-1 at 1, ¶ 2). The City's complaint also sought indemnification (Count Three) from Plaintiff for costs the City incurred based on Plaintiffs alleged breach of contract and negligence (Dkt. No. 27-1 at 19, ¶ 132). The City alleged the following in its complaint:

. The City entered into an Owner-Contractor Agreement (“Agreement”) with Plaintiff, dated May 26, 2009, for a contract price of $4, 447, 000, whereby Plaintiff agreed to “‘provide all the supplies, materials and equipment, and perform all labor, services and supervision necessary and proper to undertake and complete the DCU Center Ice System & Electrical project'” (Dkt. No. 27-1 at 5, ¶ 20 (quoting the Agreement));
. A material component of the Agreement required Plaintiff to install a new ice refrigeration system, in part composed of two reciprocating glycol brine chiller packages (“chillers”) (Dkt No. 27-1 at 5, ¶ 21);
. The Agreement required that the condenser components of the chillers have stainless steel tubes and tube sheets, while the remaining parts of the condenser were to consist of carbon steel (Dkt. No. 27-1 at 6, ¶ 23);
. One provision of the Agreement stated that “‘all materials and equipment furnished … and … all Work will be … in conformance with the Contract Documents. All Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective'” (Dkt. No. 27-1 at 6, ¶ 26 (quoting the Agreement) (alterations in original);
. The Agreement named Plaintiff as the entity “‘responsible for determining that all materials furnished for the Work meet all the requirements of the Contract Documents'” (Dkt. No. 27-1 at 6, ¶ 27 (quoting the Agreement));
. The Agreement also called for Plaintiff to maintain the new equipment and set out specifications for how that maintenance was to be performed (Dkt. No. 27-1 at 7, ¶¶ 29-32);
. The Agreement called for Plaintiff to hire a subcontractor for purposes of proper maintenance, but the contract terms provided that Plaintiff would “‘be responsible to [the City] for the acts and omissions of his employees, Subcontractors, and their agents and employees, and other persons performing any of the Work under a contract with [Plaintiff]'” (Dkt. No. 27-1 at 7, ¶ 32-34 (quoting the Agreement));
. Plaintiff approved a submittal for a subcontractor that included a plan, dated July 2, 2009 (revised July 8, 2009), for condensers containing carbon steel tubes and tube sheets (Dkt. No. 27-1 at 10, ¶¶ 49-53);
. Plaintiff certified on that submittal that “it had reviewed the submittal for compliance with the contract documents, ” despite that fact that the submittal did not conform to the contract specifications and there was no authorization for the change (Dkt. No. 27-1 at 10, ¶¶ 46, 52);
. In September 2009, Plaintiff installed the two chiller packages containing condensers with carbon steel tubes and tube sheets, which became operational in October 2009 (Dkt. ...

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